KfW: Earning power in 2013 has normalised at a high level

Frankfurt (ots) -

- Total commitment volume of EUR 72.5 billion
- Consolidated profit of EUR 1.3 billion
- NPV accounting of interest rate reductions implemented
- Significant reduction in total assets to EUR 464.8 billion
- Tier 1 capital ratio pursuant to Basel III: 17.1%

In 2013, the KfW Group recorded high demand for its financial
products (as in previous years) and approved funding at a total
volume of EUR 72.5 billion (2012: EUR 73.4 billion). The focus here
remained on funding small to medium-sized enterprises, as well as on
climate and environmental protection, and particularly supporting the
German Federal Government in implementing the energy turnaround. At
EUR 20.5 billion, international business volume was up by 4% (on EUR
19.7 billion). The Export and project finance business sector, the
KfW Development Bank business area and the subsidiary DEG all
contributed to this growth.

In line with expectations, KfW's earning power in the 2013
financial year came in lower than the previous year, which was
characterised by positive non-recurring items in interest and
valuation income. Irrespective of assuming public subsidies of EUR
264 million for the KfW promotional activities financed from the
Energy and Climate Fund, the consolidated profit of EUR 1,273 million
(EUR 2,413 million) is at the upper end of sustainable earnings
potential. KfW's own promotional activities - mainly in the form of
interest rate reductions - were increased to EUR 597 million (EUR 560
million). The interest rate reductions were reported at their net
present value for the first time ever. This was applied
retrospectively for all existing business and resulted in a one-off
charge of EUR 2.3 billion on equity. Application of this procedure
delivered two key advantages. On the one hand, the charge to KfW is
being recognised over the entire loan term already with the loan
commitments in the income statement; on the other, it facilitates
more targeted management of new business.

At EUR 1,299 million (EUR 2,259 million), consolidated profit
before IFRS effects from hedging*, which is relevant to KfW's
management and eliminates the effects induced solely by IFRS, is up
EUR 27 million on the annual result.

"The earning power normalised at a high level in 2013 and was at
the upper end of sustainable earnings potential, irrespective of the
provision of KfW funds to assume public subsidies for the KfW
promotional activities financed from the Energy and Climate Fund.
With this positive result, KfW is once again improving the capital
base to secure its long-term promotional capacities - even under the
stricter regulatory requirements of Basel III," commented Dr Ulrich
Schröder, Chief Executive Officer of the KfW Group, at Monday's press
conference on annual results in Frankfurt am Main. "Opting to convert
the representation of KfW's interest rate reductions on the balance
sheet to an NPV method is another key step in the modernisation
process and helps to synchronise the management and accounting of
KfW's promotional activities.

The operating result before valuation (before promotional
activities) of EUR 2,302 million (EUR 2,836 million) also normalised
as expected. Interest income, which is the most important source of
earnings, came in at a consolidated value of EUR 2,997 million; owing
to an extraordinary development in the yield curve, the figure for
the 2012 financial year was a record EUR 3,522 million. With stable
interest margins in the lending business, the decline was largely due
to these lower yield curve contributions. KfW continued to benefit
from its first-class credit rating.

In total, the risk provisions in the credit business resulted in
negative effects on earnings to the tune of EUR 311 million, which is
lower than expected in spite of what is still a conservative
valuation policy. In 2013, risk provisions continued to focus on the
Maritime Industry segment of Export and project finance. However,
this development has eased noticeably here compared with 2012. During
the previous year, risk provisions amounted to just EUR 155 million,
due to high positive one-off effects in other segments and the
dissolution of portfolio value adjustments.

Further easing in the Eurozone and the central banks' monetary
policy characterised the situation on the financial markets. On the
back of the improved underlying conditions, the securities portfolio
performed well again, contributing EUR 57 million (EUR 77 million) to
earnings.

The EUR 46 million (EUR 135 million) earnings from the equity
investment portfolio were primarily the result of the Promotion of
developing and transition countries business sector.

In the 2013 financial year, consolidated total assets reduced
significantly by EUR 44.7 billion to EUR 464.8 billion. The decline
is largely due to changes in the market value caused by the interest
and exchange rates in connection with derivatives used for hedging
and reporting of the same in hedge accounting. Irrespective of the
strong volume of new business, net loan receivables fell by EUR 4.3
billion to EUR 358.3 billion due to high non-scheduled repayments in
the domestic promotional lending business.

Taking the consolidated results into consideration, the total
capital ratio was 22.3% (20.6%) and the tier 1 capital ratio 20.6%
(18.2%). Under Basel III, the tier 1 capital ratio is currently 17.1%
(15.1%).

**The press release in full including an overview of the key
financial figures are available on our homepage at www.kfw.de.

* Declaration of consolidated profit before IFRS effects from
hedging: Derivatives must be reported at NPV pursuant to IFRS, even
if they are not used for trading purposes, but serve to hedge
interest and currency risks as is the case at KfW. Under IFRS, the
offsetting valuation effects of secured underlying transactions in
the balance sheet can only be considered to a limited extend and
therefore have temporary, economically unfounded effects on KfW's
earning power. These offset one other in total over the entire term
of the hedged positions.

Service:

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http://verantwortung.kfw.de/content/annual-report/

Contact:
KfW, Palmengartenstr. 5 - 9, 60325 Frankfurt
Kommunikation (KOM), Sybille Bauernfeind,
Tel. +49 (0)69 7431 2038, Fax: +49 (0)69 7431 3266,
E-Mail: presse@kfw.de, Internet: www.kfw.de